Years ago when I was in the military, I had the privilege of serving with some of the finest people I will ever know in my entire life.

It’s not a cliché. Many of my brothers in arms were incredibly honest, hard working, dedicated, loyal, intelligent, creative, courageous, and more.

And yet, if I’m being brutally honest, I also have to acknowledge that I also served alongside quite a few scumbags.

I remember one enlisted soldier in my unit who was arrested by Secret Service agents one day because he had been counterfeiting $100 bills on a Laserjet printer. (He should have been a central banker instead.)

Others routinely beat their wives and children. Others were petty criminals and kleptomaniacs.

It was a small number, for sure. But there were certainly plenty of bad apples in the military. And there are always going to be bad apples in any large organization– whether it’s the Army, or the entire federal government.

This is important. Because we live in a time when apparently the solution to EVERYTHING is MORE GOVERNMENT. Bigger government. And more expensive government.

This week, just like that… poof. The government became much bigger.

Politicians are cheering this legislative ‘victory’ as the dubiously-named ‘Inflation Reduction Act’ was passed and signed into law on Tuesday. As I’ve said before, the bill will probably make inflation worse.

But even more, the bill aims to expand the size and scope of the federal government… as if it weren’t big enough and powerful enough already.

And this takes me back to bad apples. There are already millions of people who work for the federal government. Even if just the bottom 10% are bad apples– people who abuse their positions and power for personal gain, or because of their ideological fanaticism, then a lot of terrible things can happen.

The IRS is going to potentially hire tens of thousands of people. If even 10% of those are bad apples, the damage they’ll cause is incalculable.

Exhibit A: Just take a look at the CDC. This week they admitted, rather sheepishly, that nearly everything they did during the COVID pandemic was wrong. The CDC acknowledged being plagued by a horrific culture of selfishness, bureaucracy, fear, careerism, and ineptitude, and that they need a “reset”.

“It’s not lost on me that we fell short in many ways,” said CDC Director Rochelle Walensky, in an honest assessment of her agency’s response to COVID.

Of course there are some smart, good-natured, intelligent people who work for the CDC. But with such a toxic culture, the entire organization became a Bad Apple within the government. And the consequences that resulted will be felt for years to come.

Thanks in part to the CDC’s response to COVID, the US economy ground to a halt. The supply chain broke down. Mental health, substance abuse, and domestic violence problems skyrocketed. Censorship and cancel culture reigned. And trust in major institutions, including the medical industry, plummeted.

Constantly expanding the size and authority of government only increases this risk of terrible consequences. Yet it seems to be the only solution that politicians can ever come up with.

This is the topic of our podcast today: bad apples… and why having a Plan B is really so important.

[00:00:03.670] - Holly

So the government got bigger this week. Are we celebrating?

[00:00:08.750] - Simon

Ha ha, well, some people are.

[00:00:10.180] - Holly

Some people are.

[00:00:11.470] - Simon

That's okay. The government did get a lot bigger this week because they just found another way to spend an absurd amount of money. And it's interesting thing because this is their solution to everything. The solution to everything is we need, whatever the problem is, the solution is more government. And whatever the previous problem was that we solved with more government. Well now the problem is we need even more government. The government's never big enough so we need even more government. And of course now we need a bigger IRS to be able to pay for this bigger government. You and I have discussed this a lot, that the trust in pretty much every institution and that includes the government is really bordering an all time low. We see this now: nobody trusts the media, nobody trusts the banks, nobody trusts the big tech companies, nobody trusts any of these things. And it's especially the government. Congressional approval ratings are at astonishing lows. The office of the presidency, the Supreme Court, all these various departments and agencies, individual offices within the government. Interestingly enough, even the military now is taking a hit. The military was always one of the things that sort of stood above and beyond in its reputation and the numbers, the approval ratings and the trust level and military was always quite high.

[00:01:36.700] - Simon

Even that's really starting to come down a lot. So trust levels are really at a low and let's be honest, there's a lot of good reason for that. We see all sorts of things that are now where you can say historic overreaches and shenanigans and all these things, so many just weird, weird things and you think what are they possibly going to do to top this? And then they do it again. There's just something else that people just can't believe. How could you possibly do these sorts of things? What I would say is I think in fairness and again I always try and look at things very objectively, very rationally and I want to I guess briefly mention this in the context of good apples and bad apples. When you think about how big societies are in any country that you go to, even small countries, people listen to this from all over the world, but especially big countries. I mean you get all sorts of people, you have really good people and you have really bad people and a whole lot of people in between and there's no different in the government. I would actually go back to my time when I was in the military and some of the people that I served with, I would say to this day rank as some of the finest people I will ever know in my life.

[00:02:54.220] - Simon

Some of the most noble, some of the most honorable, some of the most selfless people I have ever met and will ever meet in my entire life. At the same time, there are also some of the worst scumbags I've ever seen. There were guys that were beating their wives. There were guys that were harder drug dealers. Yeah, there were guys getting arrested. The military police would go around these guys up in their quarters, on post on the base, because the guy was beating his wife, beating his kids. Again. There were guys that had really severe substance abuse problems, or guys that had a major drug ring, prostitution ring. There were guys... I had a guy in my unit who was actually arrested. I remember the secret service showed up one day to our headquarters. And I was the executive officer. And they came in and sat down. And they took a meeting and explained that we actually had a soldier in our in our unit who was counterfeiting $100 bills. Like. Really cheap, bad, terrible $100 bills. Like, off of a laser jet printer and going around town trying to buy stuff. Whatever. These fake $100 bills. And it's actually one of the jobs of the secret service. They protect the president, and they also go after counterfeiters. And so they came and they arrested this guy. They put them in handcuffs. They hauled him away. It was like in the middle of a training session whenever the secret service came in and cuffed this guy and hauled him away. And I'm sure he did prison time or whatever. You get all kinds. You get some of the best people, like I said, I will ever meet in my life, and some really bad scumbags. And that's the way it is. I think, in anything. You can't have an organization as large as the military, the federal government, the IRS, the IRS, the FBI. The FBI is an interesting one because they've taken so much heat. They've taken so much heat. And let's be honest, there's a lot of reason for that. I mean, over the last several years, it's been one scandal after another after another. We just kind of look at bonehead.

[00:05:00.930] - Simon

How could they do that? It looks bad. There are a lot of things that look really bad. I would also say again, in fairness, I personally know a lot of FBI agents, and I'm just speaking from personal experience, the ones that I know are really great people, really great people. The kind of people that you go, well, I'm glad that person is in the FBI. Really professional, really intelligent, sophisticated, and all they want to do is just catch bad guys. They want to catch really rotten criminals and put them behind bars. That's what they want to do. Having said that, there are also a lot of bad apples. And the FBI, in fact, just the other day, there is yet another scandal. It wasn't something really reflected on the bureau itself, but something that highlighted that, yes, there are some bad apples, and it was actually this big scandal in Puerto Rico. Wow, what a surprise. Is it Tuesday? There must be another scandal in Puerto Rico. And they arrested in Puerto Rico the former governor of this lady, Wanda Vasquez, on basically bribery and corruption. And again, lockdown Wanda. Right, lockdown Wanda. So this is the one that was never elected.

[00:06:08.570] - Simon

She was the Gerald Ford of Puerto Rico.

[00:06:13.250] - Holly

Ha ha ha.

[00:06:13.250] - Simon

But at least Gerald Ford won his primary. Just barely won his primary against Ronald Reagan, but at least Gerald Ford won his primary. Wanda Vasquez didn't even actually win the primary in her own party. So that's how widely despised she was. But everybody knew she was corrupt. And it turned out, oh, well, okay, so this is whole thing and it was bribery scandal. And there was an FBI agent, actually, technically a former FBI agent who was in the middle of all this, and he was kind of brokering the bribes and everything like that. And again, it's not a good look. He got a guy who was an ex agent. So again, technically, he was no longer in the bureau. But it's not like he suddenly became corrupt. The second he retired. He became this corrupt criminal. Give me a break. So this guy was arrested too. And it's these sorts of things to go, that's a bad apple. And there are bad apples like that in any organization.

[00:07:04.150] - Holly

Oh, I have one for you. For two years, I was threatened, right? We were all threatened by the CDC, who's controlling us and like, a toxic relationship. And now they finally apologized. But I still have trust issues because this apology was a total non apology this week where what was it they said? Mistakes were made, right? Total passive voice when they're saying this. And it doesn't really engender a lot of faith from people who honestly felt like there was a breach of power there.

[00:07:43.790] - Simon

Yeah, it's funny. We're having this discussion yesterday with some friends, and I don't personally agree with it because I'm a rational adult and I can do my own research throughout all this, looking at studies, et cetera. But I at least understand the desire for people to want to have some objective authority, give them objective advice about some emerging medical threat. And I understand why people would look to the government to fill that role, to say, look, there's some brand new thing, and I don't know what to think about it. Can you tell me, is this a risk or not? What do I need to do? Should I be freaking out about this? What's the deal? And is there some independent sort of objective medical authority that can tell me whether or not it should be concerned and give me the right kind of advice? And I understand why people would look to the government for that. Personally, I don't, but I understand why people do. I don't want to be completely...

[00:08:44.250] - Holly

Traditionally, it had at least the veneer of being trustworthy. I'm not just talking about the CDC. I'm talking about all institutions. We thought Walter Cronkite was delivering us an objective, objective unbiased news. It expanded across it was generational, and now that's completely changed.

[00:09:06.110] - Simon

Yeah, it's totally changed from an institutional perspective. But we can come back to that because I think, for example, in the media, I think a lot of people, while we don't trust the media and we don't trust legacy media, people don't trust CNN, they don't trust MSNBC, they don't trust all this stuff. But there are individual voices in media that people do trust. Everybody's got places they go to where they feel like, okay, I'm getting the unvarnished truth here from this organization or this person. So I think that's a good thing. I think that the idea of the trust in the institutions is falling. I don't necessarily see that as a bad thing because people are finding we do have so many options in terms of places that we can find the right information and people that we can trust. But I think you're right. The CDC. Such an embarrassment. And this week they issued they said, oh, we conducted a study, we conducted self assessment, which is interesting, that they would have gone and done that again. It was very light touch. Mistakes were made, and they came back and said, we need a culture of what do they say?

[00:10:17.280] - Simon

We need a culture of action and we need a culture of equity. I'm not sure what equity to bring sort of identity politics into this. I'm not sure really how that impacted the outcome and the embarrassment of their covid 19 response. I'm not really sure how diversity and inclusion factor into that, but that was something that they cited and they said, oh, we need a culture of action. Actually, no, you don't need a culture of action, because that sort of was the problem. That was all the actions that you were taking and all the things that you were doing. It just happened to be all the wrong actions. And if anything, there's a culture of a complete lack of accountability. And this is sort of the thing is that this is government in general. Congress passes laws and agencies go into all these things. They issue their guidance, but there's never any accountability when they're dead, flat wrong, hilariously, embarrassingly wrong. There's never any accountability. Nobody ever gets fired. The amazing thing is about it that a lot of these people that are in charge, fauji is still running around saying, this guy is following, I mean, this is a guy who hasn't been fired.

[00:11:26.210] - Simon

He's been so wrong, proven wrong, over and over and over and over and over again. And it turns out in the CDC sort of very vaguely hints about, okay, yeah, we weren't really putting all the information out. We're sitting on a lot of information. I mean, they waited so long, so long to actually tell the truth and say, well, the people are actually really high risk of this, are people that are obese people who haven't taken care of themselves. And maybe, just maybe, we were wrong for saying that people should sit at home, coward, fear in their homes while everybody was ordering in Big Macs and drinking mass quantities of alcohol, deal with all the mental health pain, and not going to the gym because we told people you can't go to the gym, we closed all these things. So all these really unhealthy habits, maybe that was totally wrong decision. It's not even this little very brief document where they acknowledge mistakes were made. They owe a huge apology to everybody. So do the tech companies. All this stuff all along the way where they say if you had an independent opinion and you were canceled and they slapped all these warning labels on your dangerous misinformation and so forth, it turns out, oh, it actually wasn't misinformation at all.

[00:12:42.700] - Simon

The misinformation was the bullshit that was coming out of the CDC. That was the misinformation. So it was perfectly fine to spread misinformation as long as it was the official misinformation that was coming out of the CDC and not the actual truth that was coming out of the independent research and so forth that people were conducting. They owe a massive apology to so many people. And again, this is a case of bad apples. And I think within the CDC, there are a lot of really smart, intelligent people, intelligent, even well meaning people within the CDC. I think one of the big issues inside the CDC wasn't even necessarily all these terrible people. The culture itself was the bad apple.

[00:13:26.660] - Holly

Well, bad apples rot other apples.

[00:13:30.650] - Simon

The Michael Lewis book on this, I don't know if you've seen them, it's a really great expose into how absolutely rotten and hilariously incompetent the CDC was. And it's not because they don't have very intelligent people. The CDC, the prioritization, the incentive structure, et cetera, just creates these horrible, horrible, horrible outcomes. It's literally the entire organizational structure and the culture itself that is the bad apple.

[00:13:57.190] - Simon

And so we can see this idea of bad apples across government. We can see in a lot of these organizations, not to say that everybody in such and so agency or such and so whatever is bad or the agency itself is bad, I'll even say something that's going to surprise a lot of people. This almost sounds sacrilegious, but there are a lot of really even within the IRS, there are a lot of really great IRS agents. I would actually tell you that some of the most competent, sophisticated investigators in the world, especially when it comes to anything financial, are IRS agents, specifically on the criminal side, the criminal investigative agents, these are some of the most sophisticated financial investigators in the world. They really understand banking, international commerce, and transaction. They really get this stuff. These are very complex topics. They're very sophisticated people. And a lot of these guys, all they want to do is catch people that are hardcore frauds and cheats and stealing from the government, whatever. And again, there are some very good people involved in some of these organizations. Having said that, again, they're also bad apples. There are bad apples.

[00:15:06.910] - Simon

Sometimes it's the entire organization or the structure or the incentive structure within the organization that's the bad apple. But there are always bad apples inside. You get people like Lois Lerner, who was the lady infamously inside of the IRS years ago that just coincidentally happened to be targeting these sort of conservative charities and that was a quite famous case. But there are always bad apples inside of these organizations and sometimes it's just a handful of bad apples that can really wreck a lot of havoc and destruction.

[00:15:37.910] - Holly

Well, that's the thing. I try to say this earlier and I was having technical problems, so I don't know if it recorded or not, but in a box, if you have a bad apple, a rotten apple, it will corrupt the other ones. It spreads. And so I think at this point there are a lot of people who are skeptical about things like this inflation reduction act that was just passed and signed this week because they are starting to think that the bad apples have taken over. And if certain parts of the government are expanding, those parts of the government will be I've seen the word "weaponized" against them. The trust has eroded to the point where they think that these criminal investigators are going to be just investigating people who disagree with them on political, social and other topics. What do you think about that?

[00:16:29.330] - Simon

It is a trust problem, and we talked about this before. If you think about it, the analogy being in a terrible relationship and you're in a really terrible toxic relationship with somebody, whether it's a loved one, spouse, boyfriend, girlfriend, whatever, you have serious trust issues. Everything that person does you view with serious suspicion. You start extrapolating well because of this and this is going to happen. They're going to do this and this and they must be sleeping with a neighbor or whatever. You start inventing things that aren't real. You start scrutinizing these tiny little things and making a huge deal out of it. And if you look at it rationally, we know, okay, that's not really true. And this is the relationship, again, that I think that a lot of people have with their government, right?

[00:17:22.080] - Holly

Especially when they gaslight you. There is no inflation or what you were just talking about with the virus.

[00:17:30.320] - Simon

Right. You find out that you're in a manipulative codependent relationship with a really terrible person that has taken every advantage to sort of steal and plunder and create all sorts of mistrusts and so forth. So yeah, of course you have every reason to be skeptical. But then you see some little action that they take and we start saying, oh, this is going to happen. Now we sort of create outcomes. We invent outcomes that haven't happened yet. Now, it certainly makes sense to think about various scenarios and so forth, but we talked about this before. A lot of people said, oh, they're going to pass this thing with the IRS. $80 billion is going to be 87,000 gun toading agents storming down people's doors. Whatever, okay, let's tone it down a little bit. That's not going to happen, that's not going to happen. And if you just sort of dive into the numbers and the actual text, the legislation and so forth, a lot of this stuff isn't really true. But this is always the case after the Dobbs Jackson Supreme Court decision that overturned Roe v. Wade. There are a lot of people that were freaking out about all this is going to happen, that's going to happen.

[00:18:42.640] - Simon

Again, people were inventing outcomes that didn't exist. And then Kansas fairly conservative state went and passed in a statewide vote to preserve abortion rights in the Constitution. And so a lot of times the things that people think this is going to happen is going to be this terrible outcome. Again, I think we need to step back and try and look at it as rationally as possible, try and keep a level head about ourselves and look at the actual facts of the matter. I think in the case of the IRS, there actually is quite a bit of it that is earmarked specifically for enforcement, which does mean there's going to be more field agents. There's most likely going to be in terms of the gun toting special agents on the criminal side, now we're talking like 1000 people. A lot of that is going to be field auditors, people that actually go out. But those numbers, I would be surprised if it was really even 25,000 at that. Not to say that that's a good number or bad number or anything. Again, it's not the 87,000 gun toting door kicking agents that's been circulating around the media.

[00:19:53.950] - Holly

However, that's a lot of people to investigate. Only people who make more than $400,000.

[00:20:02.790] - Holly

Which is impossible. Impossible, right. Whatever the number is, it's going to be a lot of people. It's going to be a lot of people. I'd say even if it's 25,000, which is probably a mid range estimate, it could be more, it could be less. If you're talking about 25,000 field auditors, that's a lot of people. If you think about bad apples, it's even 10% bad apple. Now you've got thousands of people who are bad apples who are going out for whatever personal advancement, some kind of political fanaticism, ideological agenda, whatever the case may be, going out and causing all kinds of havoc and destruction. If you think about that in the context of the entire federal government as an institution, that vast apparatus that's got literally even a couple of million people that are working directly in or with the federal government, if even 10% of those are bad apples, you're talking about hundreds of thousands of people, hundreds of thousands of bad apples. That's a lot of destruction. That's a lot of destruction. And if you think about the top 10% of those by virtue of their rank and position and authority, that's tens of thousands of people that have significant power and authority to again, these are kind of faceless innocuous bureaucrats like Lois Lerner at the IRS who years ago just decided, well I'm going to coincidentally target all these conservative charities.

[00:21:34.710] - Simon

You get people like that. Imagine tens of thousands of people like that. Just the numbers are what they are. It's a big number. And so when your entire solution based to everything, the extent of your creativity is "We have a problem. What's the solution? Let's expand the size of government". Right? And again, if even just 10% of those people are the bottom 10% people are the really bad apples which frankly I think that may be fairly generous. The actual number may be much higher than that. But let's call it 10%. 10%. That's a lot of destruction that can be caused. So if you're talking about you're hiring 250 people or even if 2,500 them are really nasty, that's a lot of destruction out there across middle America because this isn't just people that wealthy people or multimultimillionaires, et cetera. It's ludicrous. They say, oh, this won't affect anybody who makes less than $400,000.

[00:22:35.250] - Holly

Biden said it right before he signed it.

[00:22:37.360] - Simon

Lot of them said it, they all said it. The Treasury Secretary said it. The congressman said it, senator said it. But they had the opportunity to actually codify it into the law and actually write it down and make it part of the legislation. "Say thou shalt not audit anybody who makes less than $400,000." It was brought up and they said, "No, we're not going to actually write, we're not going to write it down. We'll just say it" because politicians always do what they say, right? So we're back to the trust issue and nobody trusts them and rightfully so. As an institution, why should anybody trust these people when all they do is lie and lie and lie?

[00:23:10.500] - Holly

Well that brings up what happened earlier this month with the non raid. They keep talking about classified documents and we're supposed to trust all of this but there's a lot of things like a lot of smoke around it. So you know a thing or two about the classification system. Can you kind of go through that a little bit so we can at least have an understanding of what they might have been looking for or maybe not even in this case what they're looking for?

[00:23:39.780] - Simon

Yeah, sure. I mean I was an intelligence officer so obviously have a lot of first hand experience with this. There's a lot of mystique behind the idea of classification. It's an old joke that I can't tell you got to kill you. It's such bullshit. It's so silly. What I would say is when I was an intelligence officer and I'm sitting here and I'm looking at all these classified documents, a lot of people don't really understand how it works. You get a security clearance. There used to be something called a Defense Investigative Agency, whatever. They've kind of rolled all this stuff into various agencies. But you go through a background check depending on the scrutiny, level increases or decreases based on the level of classification. If you're trying to get a top secret clearance as opposed to secret clearances, more scrutiny. They'll go and they'll interview people and they'll definitely look at your financial records and different things like that. There are certain disqualifiers, but they'll go through and look at your finances. For example, if you've got a ton of debt, that's not a good thing because then they're going to think that okay, you're susceptible to bribery and selling secrets and things like that.

[00:24:45.560] - Simon

So they go through, they do fairly extensive background check. But your clearance basically makes you eligible to obtain certain classified documents. It's not that you can just go and just willynilly start getting access to whatever you want. All classification, all classified documents are on what's called a need to know basis. That's a real term. And you have to be working in a specific job and a specific agency that requires you to have access to certain information. There are certain things that are just sort of out there that the need to know is pretty broad, really broad. And they have entire systems. So there's one that's used widely in government called SIPRNet, which is basically like the internet. There are web browsers and websites and everything like that. But there's a certain level of encryption and you have to be on a special device, a special machine that has certain encryption on it to be able to access. It's a secret version of the internet.

[00:25:44.310] - Simon

And it was hacked last year, right?

[00:25:46.950] - Simon

That's a whole different thing. Different, yes, exactly right. So all these secrets, they make a big deal about this stuff. And to be fair, there's a lot of deal made about Hillary Clinton's emails as well. And I think the same rules apply. But there wasn't really so much a big deal made about the fact that this was with the solar winds hack. Nobody made a big deal about that. And the fact that the Chinese and the Russians got to plunder all this treasure trove of US government secrets. So I made a big deal about that. That's totally fine. Nothing to talk about there. When was the last time you heard anybody in the media talking about that? They didn't really talk about it. Even when it came up. But now it's just this classification issue. But yeah, you could browse SIPRNet and go to any agency, any intelligence agency, and they have a separate website with these secure servers that are connected to SIPRNet. And then there's another one that's actually top secret. It's called JWICS. Joint Worldwide Intelligence Communications System. JWICS is the top secret version of the Internet.

[00:26:50.190] - Simon

So these agencies then have yet another set of secure servers that they connect to an even more secure network that's got a different set of really, really high level encryption that you have to access with special machines, et cetera. And you could go around and you could look at all this stuff and the things that I always saw when I was in the intelligence business, I was actually surprised at how much completely useless, petty information was classified. I would say literally at least 90% of stuff that's classified probably shouldn't be classified.

[00:27:27.810] - Holly

Wow.

[00:27:29.550] - Simon

Government overclassifies things. Really overclassifies things. Things are, again, silly, petty, oftentimes common knowledge. It's just so stupid. And you can just stroll through and read. They classify embassy cables, right? And a lot of the stuff you can see for yourself, don't take my word for it, you can go to WikiLeaks and see a lot of this stuff, a lot of these things that were classified documents that were leaked and posted on WikiLeaks, and most of the stuff is so mundane, it's so trivial, it's so petty. And you go, really? This is secret, this is top secret. You actually classify this garbage.

[00:28:06.270] - Simon

It's hard to lend any credibility because as soon as somebody says, oh, it's classified documents, people think you're talking about nuclear launch codes. And the reality is a lot of this stuff is really just tame, lame, mundane stuff. Really petty, really silly. And it's as if sometimes you would think that they took a copy of the National Enquirer, then put a classification label on it. Sometimes that's how petty and silly some of the stuff is. And I use the National Enquirer literally because sometimes you even get analyst reports and people come out with these crazy ideas about this imminent space alien attack. Some analyst in some office somewhere in the Space Force, "we're protecting against what we think is an imminent alien attack". And then they go and they put a classification document. That's the same thing you would see in the National Enquirer.

[00:28:59.490] - Holly

Which might be the only institution people still trust.

[00:29:02.740] - Simon

Ha ha, maybe so, but there's a lot of just really ludicrous stuff and they slap classification labels on it. And then a lot of the things that people say is "well you classify stuff because you're trying to protect the source". They go, well that's not really true either, because most of these sources are so well known or have already been compromised. It's satellite imagery, for example. Give me a break. What big tech company? You tell me. Google doesn't have access to it's all on Google Earth anyways. There's so many things like, to say that there's some unique source and people don't know where it's coming from is actually quite silly. Or even some of the human sources, like a lot of these diplomatic cables saying we have to classify it so we protect the source. I will tell you, anybody with half a brain who walks into an embassy meeting, they know exactly there's always employees of the CIA pretty much at every embassy, and everybody knows exactly who the spooks are because they have the weirdest, strangest titles you've ever seen. You meet a guy in an embassy, he's wearing a kind of nice looking suit, gives you a card.

[00:30:08.260] - Simon

You look at the card, and the title on the card is one of the most incomprehensible... You're like, what is that? That's a spook. That's exactly who the spooks are. They're in what's called official cover, as opposed to non official cover. So the official cover guys are people who have these bizarre job titles, who work in an embassy, claim to be working for the State Department, but they're actually spooks. And so these are the guys that are providing a lot of information going, these embassy cables, but everybody knows who they are, and so you're not protecting the source because everybody knows who these guys are, and so they end up with this trivial, mundane, silly stuff that ends up being classified. Yes, mishandling classified information is against the law. I would actually tell you it happens so regularly, in many cases, inadvertently, people just it's not to say everybody does it every day of their lives, but it actually does happen fairly regularly, even though a lot of the stuff is supposed to be maintained in buildings with no windows, guarded by MPs and et cetera. But it still happens, and you don't really hear a whole lot about it.

[00:31:13.040] - Simon

A lot of times people get admonished, and it could be a fairly big deal, but certainly not to the extent that we've seen here over the past week or so. That's a personal take on what's been happening and kind of a nonsecret of what we've been discussing, but a little bit of a personal take on classified documents. I'm not condoning any way mishandling classified information, but what I would just say when people hear classified information, they kind of assume we're dealing with nuclear launch codes. And for the most part, that's just not the case.

[00:31:45.750] - Holly

Now that you told me, you'll have to kill me.

[00:31:47.900] - Simon

Ha ha.

[00:31:47.900] - Holly

Although we won't go into the whole controversy right now over whether a president has the right and the ability to declassify things, we'll let them settle that.

[00:32:01.050] - Simon

That's up to the legal scholars and the courts.

[00:32:04.530] - Holly

The point of all of this is that there's nothing that's happening right now that I see that is healing the wounds. Right. That's making people trust their institutions more, it sounds like, although you're saying hey, it's probably not going to be 87,000 IRS agents like we were talking about last week. The idea that there are bad apples everywhere and that certain people do take license with the power that they have does give people pause. And it's one of those things that makes you wonder kind of the reality of what could be coming. Now, you said something to me earlier, this isn't going to happen tomorrow. It's not like the IRS is going to unleash all of these new field agents and by the next tax, say half of the middle class is going to be audited. Right? This is a process and there could be amendments made.

[00:32:58.050] - Simon

Yes. So a couple of things to bear in mind. Number one is there's been a law passed, there's been funding, in theory allocated. First things first, they actually have to come up with the money. So you always have to remember that with the United States when you're running multi trillion dollar deficits, just because they allocate money for something doesn't mean, especially when you're talking about over five to ten year period, doesn't mean when you think about five years from now, are they actually going to be able to come up with that money? Will there be a source of capital that's going to go and continue buying, funding US. Deficits year after year after year? Can they really say that with a straight face that six years from now we'll still be able to run these huge deficits? And yes, sure, the Chinese will continue buying our debt, so it's not going to be a problem. We'll be able to fund this. You might actually not have that luxury. You might not actually be able to come up with the money, and you might actually have to live within your means because you can't keep running these massive deficits.

[00:33:58.030] - Simon

So even that's not a given. It's also not a given that they won't make changes to the law. It's entirely possible that there's a radical political adjustment and people come in and go, "you know what, we don't like this and we're going to pull the funding". And they could just as easily do that as well. So again, don't overreact and assume that there is a law that was passed and then sort of read into the law things that aren't actually there and just assume that all these things are going to happen. It does make sense to understand certain implications. And the implications are, yeah, sure, there's a lot of this that has been earmarked specifically for enforcement. That does mean more field auditors. I'm actually much more concerned about something else we can talk about in a second with respect to enforcement. But even with the field auditors, let's say it's 25,000, and I think that's a reasonable estimate. It could be more, it could be less, but it's not like you can just go and grab those guys and they're out tomorrow morning in the field. It's going to take a long time to recruit.

[00:35:00.450] - Simon

The job market is tight, very tight. And these people that are going to be hired by the IRS, they have to be educated. They have to have certain credentials. It's tough to find those people and to go and get a whole bunch of them, that's tough. And it sucks as well for the private sector because now the IRS is taking a very scarce resource out of the labor market, right? So it's already scarce. And now you're going to make it even more scarce so you can have them doing instead of something productive, you can have them doing things that are anti productive. So I think it's actually a terrible move. But then you're going to have to train these people, right? They don't just show up on day one and send them out in the field. It's going to take a couple of years, really to work all that through. So that's one thing to bear in mind, is it's not like this is all going to get ramped up immediately, tomorrow morning. The big priority is, first of all, they can have to recruit these people, but they also gonna have to they're going to have to fix their broken as customer service because they have no I mean, there's nobody even going to answer the phone right now.

[00:35:59.440] - Simon

So they got to fix that. There's so many things they need to fix. But the part that I was going to say that's actually even more concerning for me is the technology end of it. And the IRS has been trying to invest in technology. They haven't had the budget for it. They haven't had the funding for it. Now they do. And so you can be fairly certain that they're going to really expand. They already have a system in place that tries to flag certain things, whatever. And I think one thing that's highly likely is, and again, I'm not really extrapolating or trying to invent things that aren't there. This is based on a lot of comments from the service itself, from the commissioner, et cetera. They really want to invest in AI. And that to me is actually very scary because the government does not have a good track record at all when it comes to technology. Brought to you by the people that spent $2 billion on the Obamacare website, right, because Michelle Obama's college buddy, whatever, owned the company. I mean, it was so ridiculous. These people can't do anything right when it comes to technology.

[00:37:10.030] - Simon

It's so terrible. They're so behind the times. In the US Air Force that deals with floppy disks, with missile launches, I mean, really important stuff. They deal with old school floppy disks. It's completely ridiculous. And so for the IRS to have this AI system that goes in and looks through zillions of tax returns, through this AI and machine learning because there's a lot of data there. This is how machine learning works. You just give it lots and lots and lots of data and then it comes up with its own analytics, et cetera, and then figures out how do we audit better, how do we catch tax cheats, et cetera. Which is great, except for the fact that they're probably going to do it really poorly because the government does have a dismal track record when it comes to technological implementation. So what concerns me is that they go and take some of this money and they go and spend a lot of money, billions of dollars are going to go and waste on some AI machine learning system that fails miserably at its job. And all of a sudden now you got all these sort of regular people that get flagged by some incompetent, broken AI tax system.

[00:38:28.600] - Simon

Now everybody's getting flagged by the IRS because of some things they develop. It doesn't even touch the human beings. If a human being looked at, they go, there's nothing to see here. This is a completely normal, honest, taxpaying, law abiding citizen, but for whatever reason, machine flagged it and so now everybody's lives are turned upside down. That's the part that actually bothers me.

[00:38:50.040] - Holly

It reminds me of that Tom Cruise movie years ago. The Thought crime?

[00:38:55.290] - Simon

Oh, the Minority Report.

[00:38:56.890] - Holly

Minority Report, yeah.

[00:38:59.130] - Simon

Well, I don't know that it would really be a pre-crime issue, but I think it's a no-crime issue. That's the thing about it. People that done nothing wrong and they get flagged by some system because whoever wrote the software didn't know what they were doing and the IRS didn't really the implementation of it. The people in charge of developing that technology and implementing it just did such a pitiful job. And this is the tracker we see with the federal government.

[00:39:26.250] - Holly

The issue too is that the tax code is so complicated that there are probably a lot of people who are making mistakes without even realizing it. I know there was a book that came out a while back about how you're constantly committing felonies from the moment you wake up in the morning because some law somewhere, this goes beyond the tax code. This is just the legal system and antiquated laws that are still on the books around the US. But that's probably going to erode trust even more because then agents who are looking for money could possibly take advantage of people who are not experts and haven't gone to get their master's degree in accounting or their CPAs. So we'll see how that comes out.

[00:40:14.570] - Simon

But again, then you've got the bad apple angle of it as well.

[00:40:20.570] - Holly

And to be true, there are bad apples in the public too. There are people who are deliberately trying to...

[00:40:28.130] - Simon

There are people that are cheating and committing fraud and they're criminals of all stripes everywhere.

[00:40:34.920] - Holly

And those people probably need to fess up.

[00:40:38.630] - Simon

Yeah, that's the thing I would say, with taxes it's very interesting. It's always better to sort of come clean and say, "well, I really didn't know". If people that are doing things that are really on the aggressive side. This is definitely, I think, an opportunity to reflect and say it's probably better to come clean for a lot of reasons. Number one, because interest rates are rising, but the IRS only raises those on a quarterly basis. And so if you got to pay essentially interest on the money that you should have paid three years ago, it's a lot better to do that now rather than let the interest continue to accrue because that interest is actually rising. And usually the IRS, according to a lot of the tax lawyers I deal with, they tend to be a lot more lenient when people sort of step forward and say, "you know what, I did some things, I was a little bit aggressive, I got some bad advice and I shouldn't have done this. And I kind of realized that now, jeez, I'm really sorry, I didn't know what I was doing", and file an amended return. There are some people that say "never file an amended return because that's going to automatically trigger an audit".

[00:41:46.340] - Simon

But in a situation where there's going to be a whole lot more field agents out there auditing, if the chances of people getting audited are higher anyways, you may certainly want to consider filing amended returns and paying some potential back taxes that should have been paid for anybody who is doing things that were extra aggressive. At the end of the day, I think most people, vast majority of people who haven't done anything wrong, it is a cause for concern to think that now there's going to be all this extra scrutiny for people that haven't done anything wrong. Honestly, it's irritating. It's really disheartening to think that to have some looking over your system that might flag you or honestly. Or some guy with an axe to grind because you donated to the wrong political action committee or whatever. And then that stuff is public record and they see this and some guy with an axe to grind is just going to go "I'm going to go down this list and just start grabbing everybody who donated to this particular charity" or something like that. That is a risk. I'm not saying it's a guaranteed outcome, but statistically speaking, if you just look at bad apples across the government, there's going to be some percentage of people, whether it's 2% or 20% or whatever that number is, it's going to be some percentage of people that use and abuse their position and power and status in ways that cause tremendous amounts of destruction.

[00:43:15.110] - Holly

On that happy note. Ha ha.

[00:43:19.530] - Simon

I mean, not to leave it there, but I mean, this is a couple of points to make again. Number one is this particular issue. It's not certain, it's not final. It's been passed in the law, yes, but it's something that's supposed to roll out over literally years and years and years, which means that a lot of things could change, a lot of things could change, and the entire direction of the country could shift. We've seen this again, really throughout human history. I mean, we go back to ancient Rome and we see a series of horrible, terrible emperors, and the empire was in decline. And then suddenly you had a handful of good emperors in a row, and everything changed. They stopped the decline. They arrested the decline. They started moving in a better direction, reconquered some lost territory, changed the laws, reestablished a sound currency, made a lot of strides, and bring down inflation and bringing down their debt levels and getting their budgets under control and so forth. These things do happen. It doesn't stop the ultimate trajectory. To me, it's like health so many other things where if you're constantly making bad decisions for your entire life, if you're never getting any exercise and you're drinking excessively and you're taking in a lot of sugar and you're just eating Big Macs every day, eventually, you're going to be on a really terrible health trajectory.

[00:44:50.790] - Simon

You can get away with doing that in your teens and 20s, but if you're still doing that in your 60s, you're going to have pretty serious problems.

[00:44:57.950] - Holly

So even if you start going to the gym, these are cumulative and it's not going to make a huge dent.

[00:45:05.370] - Simon

Well, you can always start taking steps, but in the same way, it's sort of like somebody that's now in there, I don't know, around 75 or so, that decides, "now I'm going to start getting serious about my health. Finally, I'm going to put down the Big Macs and I'm going to start going to the gym". Okay, that's great. And it's going to help. It's going to arrest some of the decline and may even kind of move the needle in the opposite direction and maybe actually start improving things a little bit. But starting to take your health seriously when you're in your mid 70s is different than taking your health seriously when you're in your 30s, right? Because you have so much more maneuverability and time on your side. And when things are already when the accumulation of bad decisions has been made and that sort of total aggregate bad decision, the outcome of that is so great. It is a lot harder to steer that ship in a different direction. So in a way, if you look back to Rome again, it doesn't really stop the inevitable outcome of "here's what's going to happen", but it does actually make things better for a significant amount of time.

[00:46:12.160] - Simon

And I think that is something that I think a lot of people could probably anticipate. Nothing goes up or down in a straight line, and I think for a lot of people, things across really all of Western civilization over the last several years have been feeling down. Everybody literally in the entire planet felt this during Covid and there was so many things even before and since, but nothing goes up or down in a straight line. And so I think that, for one, it certainly makes sense to assume that there is going to be a break from that. That would be a good period as well. At the same time, though, this is the whole thinking behind this concept of having a plan B. Because when you can see these sorts of things I wrote about this fairly extensively, this inflation reduction act, I mean, it's so hilarious in so many different ways. You don't legislate your way out of inflation. The fact that they think they can do that is so ludicrous, is so pompous, is so narcissistic. We have all the government has all the power to do all this stuff. It's so ludicrous.

[00:47:23.330] - Simon

You do not legislate your way out of inflation and prosperous, healthy nations don't resort to cannibalizing the wealth and plundering their innocent, hardworking, productive people because again, and I say that very deliberately, because they had the opportunity to write it into the law and say "You know what? We're going to ignore people that are making less than $400,000 a year". They could have really you know, they could have had a hardcore they could put a probable cause or at least reasonable suspicion provision in there to say you can only out of people who are making $400,000 a year if you have very clear evidence of wrongdoing and fraud and so forth, not just even a little bit of suspicion, nothing random. They could have written all that into the law, but they didn't. They didn't. They claim that they care about middle America. They care, they care about working class people, but they don't give a shit because they had the opportunity to write in the law and they didn't. So this is not how a wealthy, prosperous nation acts. This is not the kind of legislation they pass. They don't resort to these sorts of things.

[00:48:27.060] - Simon

But it is the hallmark of nations and empires and dynasties and decline going back to ancient China. We can see examples of this in Rome. Byzantine Empire. The French Bourbon monarchy, the Ottoman Empire. This is a hallmark of empires in decline saying "We got to go after our people, we got to seize their wealth" because in many respects they feel like this is their primary source of revenue. They got to go take that money. So it's unhealthy. And I think it is a major indicator of decline. It's not to say that decline is a one way street because it can in fact be arrested and it can in fact reverse course. So nothing is completely inevitable. But you are in a position where, for example, I like to bring up Social Security. I mean, the Social Security Board of Trustees is saying, hey guys, we got like a decade basically, until these trust funds run out of money. That's going to be a big deal. That's going to be a big deal. So if you plan on being retired at any point past the early 2030s, well, guess what? You're going to have a serious problem.

[00:49:32.690] - Simon

They're going to have to drastically cut back on all the promises they made. It's going to be a big deal, right? And so it's hard to even if there's some radical political transformation and all this stuff over the next couple of years, I mean, Social Security is still going to run out of money. So there's only so much that even in a radical political transformation, there's only so much sort of good. Even if they reverse course, there's still going to be consequences and still going to be bad things that happen. And that's why, again, it just makes sense to have a plan B when you look at a lot of these things in that direction. I don't think it's cause for panic. I don't think it's caused for just try and stay above it. Try and not be outraged all the time or be depressed and despondent and panicked and worked up and stressed out. Just understand it for what it is. Number one, I think you can have at least a little bit of hope that things are probably going to change because these things are cyclical. But two, there are things that you can do about it.

[00:50:31.190] - Simon

You are, again, a lot more powerful in your own life than they would want you to believe. You do have a lot of options and tools at your disposal and taking advantage of those is completely rational thing to do.

[00:50:42.810] - Holly

Alright, thank you. Till next week.

When the solution to everything is… more government 50:48 Share

Schiff Sovereign Podcast

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When the solution to everything is… more government